- DHFL’s affordable housing portfolio is a key attraction as the real estate sector looks to bounce back
- The winning bidder will acquire a fully functional housing finance entity, with a network in place
- The deadline for submission of fresh bids under the fourth round of bidding is December 14
DHFL is grabbing headlines as bidders are vying for the asset, making claims of bidding more than the other. As per sources, the four bidders – Oaktree Capital, Piramal Enterprises, Adani Properties and SC Lowy had increased their bid amounts by anywhere between 10 per cent to 70 per cent in the second round of bids.
After Adani Properties submitted a surprise bid for the whole company in the third round, all eyes are on the fourth round of bids for which bankers have extended a free hand to applicants, allowing them to bid under any option. On the other hand, DHFL promoter Kapil Wadhawan has moved NCLT, appealing to the court to consider his offer to repay the company’s debt. So what exactly makes the bankrupt financial services company so attractive to these bidders?
First of all, DHFL is a fully functional entity albeit with a few flaws. The chosen bidder will acquire a ready housing finance entity, with 570 branches and over 2,179 permanent employees in place. As of September 30, the company has total financial assets worth Rs 76,505.57 crore. In Q2 of FY21, DHFL’s total revenue from operations stood at Rs 2,204.81 crore versus Rs 2,106 crores a year ago.
Ashvin Parekh, Managing Partner of Ashvin Parekh Advisory Services said, «The employees and managers are also putting in a good amount of effort to make sure that the portfolio lives and the company continues. So there is a certain order of support for the bidders from that aspect.»
With the focus of the company on the semi-urban and rural population, DHFL’s branches are located in regions with growing real estate opportunities. While the wholesale book has 92.61 per cent of Gross NPAs, the retail book remains attractive. DHFL’s retail book had 21.31 per cent gross NPAs as per the annual report, but housing finance loans are usually a low NPA zone for companies.
According to Parekh, DHFL has created a very good portfolio of affordable housing, which could be one of the attractions. «All the bidders seem to be looking at the affordable housing segment as the small ticket size of those loans is quite manageable. At the time of portfolio building, DHFL seems to have focused largely on the less than Rs 25 lakh exposure,» he said.
Recent government announcements to boost the real estate sector also make the housing finance segment attractive. «There indications are about the real estate sector picking up again as the economy revives. There is hope in this portfolio. It can generate more value and can repay the investors,» he added.
All eyes are now on the fourth round of bidding where companies have the chance to bid for any part or all of DHFL. Going by the first three rounds, it is expected to be a fierce fight.